Michael Steinhardt

 

Michael Steinhardt

Born:	Mount Kisco, New York, in 1941
Affiliations:	Calvin Bullock Loab Rhoades & Co Steinhardt Partners
Most Famous For:	Steinhardt Partners achieved a performance track record that still stands out on Wall Street: 24% compound average annual returns – more than double the S&P 500 – over a 28-year period. What\'s more amazing is that Steinhardt accomplished this record with stocks, bonds, long and short options, currencies and time horizons ranging from 30 minutes to 30 days. There were few investment instruments over which Michael Steinhardt did not wield some mastery.

Personal Profile

As a teenager, Michael Steinhardt was reading stock charts and hanging around brokerage offices. He finished high school at age 16 and flew through the Wharton School of Finance in three years, graduating in 1960. 

He began his career on Wall Street in research and analyst positions with mutual fund company Calvin Bullock and the brokerage firm of Loab Rhoades & Co. In 1967, Steinhardt, along with two other rising stars in the investment field, Howard Berkowitz and Jerrold Fine, formed a hedge fund company based in New York, which they named Steinhardt, Fine, Berkowitz & Co. Under Steinhardt's direction, the firm was consistently successful in identifying macro market moves and then fitting its securities trading strategies into these situations. In 1979, Berkowitz and Fine left the partnership, which was then renamed as Steinhardt Partners. 

Steinhardt's spectacular career ended in 1995 when he decided to close the business with his fortune and reputation intact after his fund gained 21% in its last year. This was a year removed from the tough loss that he suffered in 1994, when interest rates moved against him, which produced a 30% loss for his fund. 

He then turned to philanthropic activities and served as a board member for institutions such as New York University, University of Pennsylvania and Brandeis University. He has also served on the board of Wisdom Tree Investments, a New York-based asset management firm that sponsors exchange-traded funds. 

Investment Style

Steinhardt had a long-term investor's perspective but, for the most part, invested as a short-term strategic trader. He bet on directional moves using an eclectic mix of securities and was backed up by a team of traders and analysts. As mentioned above, he emphasized macro asset allocation type moves from which he harvested his gains. Charles Kirk, publisher of The Kirk Report, gleaned these "rules of investing" from a Steinhardt speech back in June, 2004, which show that even a high-flying hedge fund investor needs to be grounded:

• Make all your mistakes early in life. The more tough lessons early on, the fewererrors you make later.
• Always make your living doing something you enjoy.
• Be intellectually competitive. The key to research is to assimilate as much data aspossible in order to be to the first to sense a major change.
• Make good decisions even with incomplete information. You will never have all the information you need. What matters is what you do with the information you have.
• Always trust your intuition, which resembles a hidden supercomputer in the mind. It can help you do the right thing at the right time if you give it a chance.
• Don't make small investments. If you're going to put money at risk, make sure the reward is high enough to justify the time and effort you put into the investment decision.

Publications

• "No Bull: My Life In And Out Of Markets"byMichael Steinhardt, (2001)

Quotes

"One dollar invested with me in 1967 would have been worth $481 on the day I closed the firm in 1995, versus $19 if it had been invested in a Standard & Poor's index fund."

"I always used fundamentals. But the fact is that often, the time frame of my investments was short-term."

"I do an enormous amount of trading, not necessarily just for profit, but also because it opens up other opportunities. I get a chance to smell a lot of things. Trading is a catalyst."

"Somehow, in a business [securities trading] so ephemeral, the notion of going home each day, for as many days as possible, having made a profit – that's what was so satisfying to me."

George Soros

George Soros

Born:	Budapest, Hungary, in 1930
Affiliations:	F.M. Mayer Wertheim & Company Arnhold & S. Bleichroeder Soros Fund Management
Most Famous For:	George Soros gained international notoriety when, in September of 1992, he risked $10 billion on a single currency speculation when he shorted the British pound. He turned out to be right, and in a single day the trade generated a profit of $1 billion – ultimately, it was reported that his profit on the transaction almost reached $2 billion. As a result, he is famously known as the "the man who broke the Bank of England." Soros is also famous for running the Quantum Fund, which generated an average annual return of more than 30% while he was at the helm. Along with the famous pound trade, Soros was also cited by some as the "trigger" behind the Asian financial crisis in 1997, as he had a large bet against the Thai baht. He is also widely known for his political activism and philanthropic efforts.

Personal Profile

Soros fled Hungary in 1947 for England, where he graduated from the London School of Economics in 1952 and then obtained an entry-level position with an investment bank in London. In 1956, he immigrated to the United States and held analyst and investment management positions at the New York firms of F.M. Mayer (1956-59), Wertheim & Co. (1959-63) and Arnhold & S. Bleichroeder (1963-73). 

Soros went off on his own in 1973, founding the hedge fund company of Soros Fund Management, which eventually evolved into the well-known and respected Quantum Fund. For almost two decades, he ran this aggressive and successful hedge fund, reportedly racking up returns in excess of 30% per year and, on two occasions, posting annual returns of more than 100%.

In the late 1980s, he gave up the day-to-day management of the Quantum Fund and, as one of the wealthiest people in the world, became a substantial philanthropist, donating huge sums worldwide through his Open Society Foundation. 

In recent years, political activism has also become important to Soros. He has written and lectured extensively on the role of the U.S. in world affairs as well as issues dealing with, among others, human rights, political freedom and education. 

When Soros was offered an honorary degree from Oxford University and was asked how he wanted to be described, he is quoted as saying: "I would like to be called a financial, philanthropic and philosophical speculator." This surely sums up the life of George Soros, particularly if the adjectival phrase "very successful" is added to the description. 

Investment Style

George Soros was a master at translating broad-brush economic trends into highly leveraged, killer plays in bonds and currencies. As an investor, Soros was a short-term speculator, making huge bets on the directions of financial markets. He believed that financial markets can best be described as chaotic. The prices of securities and currencies depend on human beings, or the traders - both professional and non-professional - who buy and sell these assets. These persons often act out based on emotion, rather than logical considerations.

He also believed that market participants influenced one another and moved in herds. He said that most of the time he moved with the herd, but always watched for an opportunity to get out in front and "make a killing." How could he tell when the time was right? Soros has said that he would have an instinctive physical reaction about when to buy and sell, making is strategy a difficult model to emulate. 

When he fully retired in 2000, he had spent almost 20 years speculating with billions of other people's money, making him - and them - very wealthy through his highly successful Quantum Fund. He made some mistakes along the way, but his net results made him one of the world's wealthiest investors in history.

Publications 

• "The Alchemy Of Finance" by George Soros (1988)
• "Soros On Soros: Staying Ahead Of The Curve" by George Soros(1995)
• "Open Society: Reforming Global Capitalism" by George Soros(2001)
• "The Bubble Of American Supremacy: Correcting The Misuse Of American Power"by George Soros(2003)
• "Soros: The Life And Times Of A Messianic Billionaire" by Michael Kaufman(2002)

Quotes

"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong."

"I rely a great deal on animal instincts."

"Playing by the rules, one does the best he can, irrespective of the social consequences. Whereas in making the rules, people ought to be concerned with the social consequences and not with their personal interests."

"George opened all of our thinking to macroeconomic theory, and he made globalists of us all by making us understand the importance of geopolitical events on the U.S. economy." (Byron Wien, Morgan Stanley)

James D. Slater

Born:	U.K., in 1929
Affiliations:	Leyland Motor Corporation Slater Walker Securities BioProjects International PLC Galahad Gold PLC
Most Famous For:	The author of an investment column in London\'s The Sunday Telegraphunder the pen name of "The Capitalist," which became a forum for publicizing his personal stock investment methodology. His strategies were one of the first to be made widely available to the investing public in the U.K. Jim Slater is credited with inventing the price-earnings to earnings-growth ratio (PEG) and popularizing its use in America through his book, "The Zulu Principle" (1992).

Personal Profile

Slater began his career as a chartered accountant and then moved into corporate managerial positions from 1953 to 1963 with three different U.K. manufacturing firms, the last of which was the prominent Leyland Motor Corporation. In 1964, he and Peter Walker founded an investment company called Slater Walker Securities. Through this firm, Slater became famous as a major player in the U.K.in aggressive corporate takeovers, building Slater Walker into a significant industrial and financial conglomerate, which, in 1969, evolved into an investment bank. 

Unfortunately for Slater, his successful career in investment banking came to an abrupt end with the collapse of Slater Walker Securities during the U.K.'s 1973-74 recession, leaving Slater personally bankrupt.

He fought his way back to solvency through private investing and launched a career as a financial writer. His widely read investment column, "The Capitalist," and an extremely popular investment advisory service called "Company REFS," which provided "really essential financial statistics" on all publicly traded U.K. companies, positioned Slater as an investment guru. 

He became known as one of his country's most successful professional investors. A parallel career as an educator of individual investors and as an author of children's books flourished. In 2007, he remained active today as a major investor in a variety of small, growth-oriented companies.

Investment Style

The stock picking strategy that Slater employed developed from the columns he wrote under the pseudonym "Capitalist" in London's Sunday Telegraph, and which subsequently formed the basis for his "Zulu Principle" of investing. Slater's favored type of investment was the small growth company that was undervalued by the market - a so-called hidden gem. At the core of his methodology is his focus on finding small growth stocks before they hit the big time.

The main tool, which Slater invented and popularized to find this type of stock, was his pioneering price-earnings to growth ratio, or PEG. This equation combines growth and value investing. The formula compares a company's price-earnings ratio with its expected, or estimated, earnings per share growth rate. 

Slater realized that a P/E ratio didn't mean that a stock was expensive as long as its earnings growth was high. For example, if company's stock was at a relatively high P/E of 30, but its earnings were expected to grow at a rate of 30%, it would have a PEG of 1, which is generally considered a very favorable value relationship. Slater pioneered the use of the PEG ratio, which today is widely used in investment analysis.

Publications

• "Investment Made Easy" by Jim Slater(1995)
• "The Zulu Principle: Making Extraordinary Profits from Ordinary Shares" by Jim Slater (1992).
• "Beyond The Zulu Principle: Extraordinary Profits From Growth Shares" by Jim Slater(2000)
• "How To Become A Millionaire" by Jim Slater(2000).
• "Make Money While You Sleep" by Jim Slater (2002).

Quotes

"Most leading brokers cannot spare the time and money to research smaller stocks. You are therefore more likely to find a bargain in this relatively under-exploited area of the stock market."

Highlighting what Slater thought was the inherent greater potential for the growth of smaller companies, he said, "I once compared a very large company with an elephant by making the comment that elephants don't gallop."

"You get out of an investment what you put into it, so the first decision you have to make is how much time you are prepared to devote to the initial task of acquiring a basic knowledge of investment.

Thomas Rowe Price, Jr.

Thomas Rowe Price, Jr.

Born:	Linwood, Maryland, in 1898; Died in 1983
Affiliations:	Mackubin Goodrich & Co. T. Rowe Price Associates, Inc.
Most Famous For:	Price is considered to be "the father of growth investing." He founded the investment firm T. Rowe Price Associates, Inc.

Personal Profile

Thomas Rowe Price spent his formative years struggling with the Depression, and the lesson he learned was not to stay out of stocks but to embrace them. Price viewed financial markets as cyclical. As a "crowd opposer," he took to investing in good companies for the long term, which was virtually unheard of at this time. His investment philosophy was that investors had to put more focus on individual stock-picking for the long term. Discipline, process consistency and fundamental research became the basis for his successful investing career. .

Price graduated from Swarthmore College with a degree in chemistry in 1919 before discovering that he liked working with numbers better than chemicals. He moved into a career in investments when he started working with the Baltimore-based brokerage firm of Mackubin Goodrich, which today is known as Legg Mason. Price eventually rose to become its chief investment officer. 

Over time, Price became frustrated by the fact that "the firm did not fully comprehend his definition of growth stocks," so Price founded T. Rowe Price Associates in 1937. At that time, he defied convention by charging fees based on investments that clients had with the firm, not commissions, and always "putting the client's interests first." Price believed that as his clients prospered, the firm would too. 

In 1950, he introduced his first mutual fund, the T. Rowe Price Growth Stock Fund. He was the company's CEO until his retirement in the late 1960s. He eventually sold the company in the early 1970s, but the firm retained his name and, today, one of the nation's premier investment houses. 

Investment Style

Thomas Rowe Price's investment management philosophy was based on investment discipline, process consistency and fundamental analysis. He pioneered the methodology of growth investing by focusing on well-managed companies in fertile fields whose earnings and dividends were expected to grow faster than inflation and the overall economy. John Train, author of "The Money Masters", says that Price looked for these characteristics in growth companies:

• Superior research to develop products and markets.
• A lack of cutthroat competition.
• A comparative immunity from government regulation.
• Low total labor costs, but well-paid employees.
• At least a 10% return on invested capital, sustained high profit margins, and a superior growth of earnings per share.

Price and his firm became extremely successful employing the growth stock approach to buying stocks. By 1965, he had spent almost thirty years as a growth advocate. At that time, many of his favorite stocks became known in the market as "T. Rowe Price stocks." However, by the late '60s, he had become wary of the market's unquestioning enthusiasm for growth stocks – he felt the time had come for investors to change their orientation. He thought price multiples had become unreasonable and decided that the long bull market was over. This is when he began to sell his interests in T. Rowe Price Associates. 

By 1973-1974, what Price's forecast took shape and growth stocks fell hard and fast. Much to Price's dismay, his namesake firm barely managed to survive. Obviously, the term, "irrational exuberance" didn't exist in those days, but its destructive force was well appreciated by Thomas Rowe Price. 

Quotes

"It is better to be early than too late in recognizing the passing of one era, the waning of old investment favorites and the advent of a new era affording new opportunities for the investor."

"If we do well for the client, we'll be taken care of."

"Change is the investor's only certainty."

"No one can see ahead three years, let alone five or ten. Competition, new inventions - all kinds of things - can change the situation in twelve months."

Julian Robertson

Julian Robertson

Born:	Salisbury, North Carolina, in 1933
Affiliations:	Kidder Peabody Webster Management Corporation Tiger Management Group (TMG)
Most Famous For:	Robertson had the best hedge fund record throughout the 1980s and 1990s. It is reported that the compound rate of return to his investors was 32%. During his active years, he was considered to be the "Wizard of Wall Street." His hedge fund, Tiger Management, became the world\'s largest fund, which peaked at over $23 billion invested.

Personal Profile

Robertson graduated from the University of North Carolina with a degree in business administration in 1955. After a stint in the Navy, he joined Kidder, Peabody & Co. in New York in 1957 and, over a twenty year career, became one of the firm's top producing stockbrokers. Subsequently, he became head of Kidder Peabody's money management subsidiary, Webster Management Corporation. 

He started on his own, founding the investment/hedge fund firm, Tiger Management Group, in 1980. Year after year of brilliant returns turned a reported $8 million investment in 1980 into $7.2 billion in 1996. During the later part of this period, Robertson was the reigning titan of the world's hedge funds. At his peak, no one could best him for sheer stock-picking acumen. Investors, at a required minimum initial investment of $5 million, flocked into his six hedge funds.

In the late 1990s, Robertson agonized over the tech-stock craze and, while avoiding what he considered to be "irrational" investing, the TMG funds missed out on any participation on the big gains of the sector. The gradual demise of Tiger from 1998 to 2000, when all its funds were closed, was reflected in the plunge in assets under management from a high of $23 billion to a closing value of $6 billion.

Poor stock picking and large, misplaced bets on risky market trades are usually cited as the cause of Robertson's downfall. However, it is felt by many objective observers that high-level executive defections from TMG's management, as well as Robertson's autocratic managerial style and notorious temper, eventually took their toll on the firm's performance.

While continuing to manage his own investments, Robertson retired from the hedge fund business. He is active in philanthropy and supporting the resolution of environmental issues. 

Investment Style

Realistically speaking, there is very little the average investor can use with regard to Robertson's approach to investing. It was highly personal. In TMG, Robertson would get input from his analysts and make all the investment decisions. 

It is said that Robertson was a macro trader, and often rode worldwide trends. He argued against using fundamentals, a position that well might have led to the poor performance and liquidation of his Tiger funds in 2000.

His investment style, about which there is very little written, consisted of a "smart idea, grounded on exhaustive research, followed by a big bet." Not exactly a practical framework that would work for the general investing public. 

Robertson's highly individualized approach served him well for a time, but when the end came, it was abrupt - a not unfamiliar phenomenon in the world of hedge fund investing. 

Publications

• "Julian Robertson: A Tiger in the Land Of Bulls And Bears" by Daniel A. Strackman (2004).

Quotes

"Our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don't do better than the 200 worst, you should probably be in another business."

"When Robertson is convinced that he is right," a former Tiger executive notes, "Julian bets the farm."

"Hear a [stock] story, analyze and buy aggressively if it feels right."

William J. O'Neil

Born:	Oklahoma City, Oklahoma, in 1933
Affiliations:	Hayden, Stone & Company William O\'Neil & Company, Inc. O\'Neil Data Systems, Inc. Investor\'s Business Daily
Most Famous For:	Bill O\'Neil is a top-performing stock broker, inventor of the growth stock investing strategy, CANSLIM, author and founder of the national financial newspaper, Investor\'s Business Daily, which competes with The Wall Street Journal.

Personal Profile

Bill O'Neil majored in business administration at Southern Methodist University, receiving a Bachelor of Arts degree in 1955. After military service, he started his career as a stockbroker with Hayden, Stone & Company in 1958, and developed an investment strategy (CANSLIM), which made him the highest performing broker in his firm. 

His professional and financial successes lead him to form a brokerage firm, the William O'Neil & Co., Inc, in 1963. At 30 years old,he became the youngest person to buy a seat on the New York Stock Exchange. 

In 1983, he founded a national financial daily newspaper called Investor's Daily, which became the Investor's Business Daily in 1991. As of 2007, he serves as CEO of William O'Neil & Co., is the chairman and publisher of the Investor's Business Daily, and lectures and writes on investment topics nationwide.

Investment Style

O'Neil blends a mixture of quantitative and qualitative strategies in his performance-oriented investing approach. In brief, his investment style is to seek out only those growth stocks that have the greatest potential for swift price rises from the moment they are purchased. 

Essentially, Bill O'Neil's motto is "buy the strong, sell the weak." His criteria for identifying a stock that's about to head for the stratosphere are summarized in his well-known acronym CANSLIM:

C – Current quarterly earnings per share have increased sharply from the same quarters' earnings reported in the prior year (at least 25%).

A – Annual earnings increases at a compound rate of no less than 25% (P/E is unimportant – probably in the range of 20 to 45 with these stocks) annually over the last five years.

N – New products, new management, and new highs. Stocks with a good "story."

S – Supply and demand. The less stock available, the more buying will drive up the price. Look for stocks with 10 to 12 million shares outstanding.

L – Leaders and laggards. Stick with those stocks that outperform and shed those that under perform.

I – Institutional ownership. Favor companies that are "under owned" by the top professional investors.

M – Market direction. Buy stocks on major downturns, but avoid purchases after a decline of 10% or more gets underway.

Publications

• " How To Make Money In Stocks" by William J. O'Neil(1988).
• "24 Essential Lessons For Investment Success" by William J. O'Neil (1999).
• "The Successful Investor" by William J. O'Neil(2003).

Quotes

"Since the market tends to go in the opposite direction of what the majority of people think, I would say 95% of all these people you hear on TV shows are giving you their personal opinion. And personal opinions are almost always worthless … facts and markets are far more reliable."

"The whole secret to winning and losing in the stock market is to lose the least amount possible when you're not right."

"What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower."

John Neff

John Neff

Source: CFA Institute

Born:	Wauseon, Ohio, in 1931
Affiliations:	National City Bank of Cleveland Wellington Management Company
Most Famous For:	John Neff\'s average annual total return from Vanguard\'s Windsor Fund during his 31-year tenure (1964-1995) as portfolio manager was 13.7%, against a similar return from the S&P 500 Index of 10.6%. He showed a great consistency in topping the market\'s return by beating the broad market index 22 times during his tenure and was regularly in the top percent of money managers. He was considered the "professional\'s professional," because many fund managers entrusted their money to him with the belief that it would be in safe hands.

Personal Profile

Neff graduated suma cum laude with a Bachelor of Arts degree from the University of Toledo in 1955. While working as a securities analyst with the National City Bank of Cleveland, where he stayed for eight years, he obtained his Master of Business Administration from Case Western Reserve Universityin 1958. 

He joined the Wellington Management Co. in 1964, becoming the portfolio manager of the Windsor, Gemini and Qualified Dividend funds. He retired in 1995 after more than three decades of spectacular, market-beating investment results. Neff's investing autobiography, "John Neff On Investing",was published in 2001. 

Investment Style

John Neff did not describe himself as either a value or contrarian investor, preferring instead to characterize his investing approach to one of buying "good companies, in good industries, at low price-to-earnings prices." Despite his value-contrarian investor disclaimer, Neff's investment management career shows a considerable amount of this type of investing strategy. 

Neff practiced portfolio concentration over diversification. He pursued stocks of all sizes – large, small, and medium – as long as they evidenced low P/E ratios, which he described as "low P/E investing." Two of Neff's favorite investing tactics were to buy on bad news after a stock had taken a substantial plunge and to take "indirect paths" to buying in to popular industries. This involved, for example, buying manufacturers of drilling pipe that sold to the "hot stock" (too pricey for Neff) oil service companies. 

He preached against participating in "adrenaline markets" (momentum driven) and preferred face-to-face meetings with a company's management to assess its integrity and effectiveness. For most individual investors, this type of contact is not a realistic possibility; however, using Neff's rigorous fundamental analysis techniques as applied to a company's financials will turn up enough management performance indicators to compensate for the inability to directly interact with a company's managers. 

As noted by Ryan Furman in his July 2006 interview with Neff for the Motley Fool, "most great investors are serious bookworms." John Neff is no exception: "He gained notoriety for taking all of his weekly Wall Street Journal copies home for a second read during the weekend." Furman also reported that Neff reads Value Line religiously. Stock investors would be well advised, like Neff, to give these two sources of investing guidance as much attention as possible.

Publications

• "John Neff On Investing" by John Neff and Steven L. Mintz (2001)

Quotes

"It's not always easy to do what's not popular, but that's where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized."

"I've never bought a stock unless, in my view, it was on sale."

"Successful stocks don't tell you when to sell. When you feel like bragging, it's probably time to sell."